Client Communication August 2025

1. Markets and Portfolios

The last 12 months has seen heightened volatility given the continuation of global conflict, economic uncertainty, Trump Tariffs, falling interest rates, etc. Equity investment such as Australian and International shares generated strong returns overall in a very challenging environment, whereby cash and term deposits have seen interest rates starting to fall as inflation concerns reduced.

During the year managed portfolios such as those held with Ishares and Drummond navigated the volatility well. There are a significant number of underlying transactions that occur in relation to these portfolios, as they regularly review medium and long term economic data together with undertaking assessment and action in a timely manner for any market events (eg Trump tariffs).

The outlook remains very opaque. Whilst inflation issues have subsided (at least for now), geopolitical and economic factors remain heightened. Investment markets are at high valuations (Australia is near record price levels, and a 20 year high on valuations). Company profits will need to rise substantially in the period ahead to justify current share valuations – although the forecast is for only 8% profit improvement next year, whereby interest rates would need to fall significantly to support domestic property valuations.

We have attached some further information for those who like to read more. This includes:

• Drummond Market Insights – Grinding Through 2025. This is a snapshot of global market valuations and outlook Grinding Through 2025 – click on link.
• JP Morgan Guide to the Markets – as at 30 June 2025. These are an extensive number of charts that can provide interesting thought and discussion. See attachment.

Lower priced domestic property is likely to receive support from the Federal Government guaranteeing 15% of loans from January, allowing first home buyers the capacity to buy a house with only a 5% deposit without paying mortgage insurance. This will likely see Australian debt household debt increase, push up the price of housing and make it less affordable and result in higher future debt defaults. But at least some people can buy an even less affordable house without having to initially save as much!

For our clients, having a well-defined strategy and staying the course of market events and volatility will be as important as ever. Having high levels of diversification, and potentially broadening diversification in the future will be important, as will managing portfolio costs. There are a number of initiatives we are working on in respect of the latter. We will be in touch to provide further advice as appropriate.

2. First Guardian Master Fund — Loss Summary & Cautionary Note

Recent media reports have highlighted the loss of superannuation capital in an investment scheme known as the First Guardian Master Fund. Prior to these reports, we were unaware of this scheme.

It is concerning that such schemes can still operate, even briefly, in Australia. Historically, schemes promising quick wealth, limited availability, and life-changing opportunities have been prevalent. While some may begin with legitimate intentions, internal or external issues often lead to their failure, sometimes after dubious attempts to survive. Others are outright Ponzi schemes from the start.

These failed investments are sometimes promoted by individuals, accountants, financial advisers, lawyers, and others who are perceived as knowledgeable or successful. When these promoters are caught, the law appropriately imposes severe penalties, including asset seizures and lengthy jail terms. Unfortunately, by this time, it is often too late for investors to recover their funds.

In essence, if an investment opportunity sounds too good to be true, it likely is. It is advisable to steer clear of such schemes.

What Happened:

The First Guardian Master Fund collapsed, affecting around 6,000 investors and involving approximately $590 million in superannuation funds. They said their investments were focussed on shares, property, private equity and fixed interest – often asset classes used for investment. This failure followed on from “Shield Master Fund” and “Australian Fiduciaries” who also collapsed in the past year.

How Investors Were Enticed: 

Many were contacted via cold calls by lead generators and referred to ‘financial advisers’ who recommended rolling super into retail or SMSF structures before investing in First Guardian. Promises of high returns—far exceeding typical expectations—were made, often with little disclosure of risks.

Misuse of Funds
ASIC alleges substantial misappropriation:

• $274 million transferred to offshore entities linked to the fund’s director;
• funds diverted into failed director-linked property projects, craft breweries, and a restaurant group;
• $45 million in marketing and fees paid from the fund.

Regulatory and Legal Action

Falcon Capital (the responsible entity) is in liquidation; ASIC has frozen assets and imposed travel bans on key individuals. Multiple investigations are underway across the advice chain.

Recovery Outlook
Liquidators warn that asset values were overstated, and only a fraction may be recoverable—some investors may lose all or nearly all of their super.

Key Takeaways

• It is very important that people remain prudent in relation to their investments and superannuation positions.
• If an investment opportunity sounds too good to be true, it probably is—especially when promoted via cold calls or marketing-heavy channels.
• At Forty Fifty we prioritise diversified, mainstream, well known, well regarded, well researched, investment strategies. To be fair, we could be accused of being a bit boring. If someone is chasing high risk for potentially high return products, they aren’t a client for us. We are in the business of investing (and a broad range of other strategic advice). We are not in the business of speculating.

Investment and financial success isn’t about getting lucky. It is about well defined strategies that consider a broad range of topics, including capacity to spend on lifestyle, taxation planning, estate planning, Centrelink effectiveness, portfolio construction, lowering costs where beneficial, insurance protection where needed, etc. We are an advice based business, not a sales business. In relation to the investment piece of a clients overall financial strategy, we often recommend investing via high-integrity super strategies through respected industry funds and platforms like BT Panorama (Westpac owned), ensuring independent trustee and custodian oversight and multiple layers of protection.

3. Cybersecurity Risks and Recent Super Fund Breaches

In April 2025, several large superannuation funds — including AustralianSuper, Australian Retirement Trust, HostPlus, and RestSuper — were the target of a cyber attack in which funds were stolen from members’ investment accounts. It is our understanding that the funds have all been reinstated by the superfunds, albeit probably at the expense of other members. No clients were impacted.

At the time, these organisations did not have multi-factor authentication (MFA) in place for logging in. We understand MFA has now been implemented, but this incident underscores the need for vigilance:

• Store your usernames and passwords securely
• Use strong, unique passwords for each financial account.
• Enable MFA wherever available.

Cybercrime remains a serious and growing threat, and data security should be treated as a top priority to help protect your financial assets.

⚠ Scam & Security Tips – Protecting Your Super & Investments

1. Be wary of “too good to be true” offers
   High returns with little or no risk do not exist in legitimate investing. Cold calls, social media ads, or unsolicited emails about moving your super should be treated with extreme caution.
2. Keep your login details safe
   Use strong, unique passwords for each account. Store them securely (password manager or secure notebook). Never share them over email or phone.
3. Use multi-factor authentication (MFA)
   MFA adds a second layer of protection — a must for your super, banking, and investment accounts. Most large super funds now offer MFA — turn it on immediately.
4. Slow down before acting
   Scammers often use urgency to pressure decisions. Take the time to verify, and if unsure, contact us before you commit. Also be careful of something online that suggests say “three simple steps to take control of your super”, it may be just luring you to provide enough personal details for them to simply take control of your super!

4. BT Panorama Fee Update

For clients using BT Panorama’s lower-cost compact version: the base annual platform fee will rise from $180 to $240 from October.

While disappointing, we’ve successfully negotiated fee reductions on other investments including the iShares SMA strategies that will more than offset this increase for most clients.

We are in an environment where underlying investment costs are typically coming down, as scale is increasing and technology is reducing costs. We can assure you that we are taking actions on a national scale to drive the cost reduction theme and look forward to updating you shortly with new initiatives we are securing to benefit our clients.

5. Upcoming Client Seminar (September)

We are planning a seminar covering:

• Centrelink Guidance — asset and income tests, plus step-by-step myGov setup and renewal processes. Given the costs and inefficiencies of the Centrelink system, we will not be able to act as  Nominee for clients using the PRODA system going forward unless absolutely necessary. However, we will assist clients in getting easy access via MyGov, from which we can assist you in the future.
• Aged Care Update — anticipated increases in aged care costs and strategic preparation.

We will be in touch very soon with full details of the Centrelink and Aged Care Seminar so you can register and attend.